Overview of North Carolina Housing Market
North Carolina has a solid housing market. It’s not too expensive, not very volatile and affordable in most areas. It also has a relatively low average effective property tax rate of 0.84%.
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Factors in Your North Carolina Mortgage Payment
Property taxes are one of the first things to consider as an added cost to homeownership. In North Carolina, you can expect to pay roughly 0.84% of your home value. This is the 20th-lowest effective tax rates in the nation.
North Carolina property taxes are based on the value of the property, which is determined by a county assessor at least once every eight years. Property tax is collected and determined by the county in which your home is located, and is not collected at the state level. Certain cities, counties and tax districts will collect additional taxes for certain services, such as fire protection. Certain populations can apply for property tax relief in North Carolina. This includes elderly persons, disabled veterans and disabled persons over 65.
After taxes you’ll want to consider homeowners insurance. North Carolina homeowners pay an average of $1,117 per year for a policy. It’s pretty affordable compared to the rest of the nation, and North Carolina sits right in the middle at 25th-highest premium cost.
While the majority of homes in North Carolina aren’t on the coastline, for those considering coastal property, additional insurance will be a consideration. Hurricane Sandy resulted in $57 million in private insurance claims in North Carolina, and two of the most hurricane prone counties in the U.S. are in North Carolina. In 2013, only about 9% of all insured property in North Carolina was located in a coastal area, but the total insured value was worth $163.5 billion, according to the Insurance Information Institute. Only about 130,000 flood insurance policies were active in 2015 despite regular homeowner insurance not covering flood damage. Those looking for coverage can apply for coverage under the National Flood Insurance Program.
For homeowners who can’t qualify for insurance coverage on the private market, North Carolina has the Fair Access to Insurance Requirements (FAIR) Plan, also known as the North Carolina Joint Underwriting Association (NCJUA). This tax-exempt association is a market of last resort that provides basic property insurance. For those in coastal areas, NCJUA has a sister organization called the North Carolina Insurance Underwriting Association (NCIUA) which is known as the Coastal Property Insurance Pool. It provides basic property insurance for those in beach and coastal areas.
Costs to Expect When Buying a Home in North Carolina
Further costs to include in home buying is the price of a home inspection prior to closing on a property. You’ll likely want to hire someone as your due diligence about the condition of the property. It’s always best to get the most complete picture of the home you’re planning to buy. Home inspections cost between $350 to $500, with larger homes at the upper end of the range, and condos and smaller homes at the lower end. Optional add-on tests include mold, radon, termite and infrared, which you can arrange if you want. While inspections aren’t a requirement of a contract (unless it’s a specialized loan), it’s a prudent step to take before making the big financial decision of buying a home. In some cases, it can help you negotiate the asking price or repairs.
After the inspection period, you’ll continue with the home buying process and eventually make it to the final step: closing. At the time of closing, you’ll be required to pay a number of fees for various services ranging from your mortgage lender’s origination fees, to the county clerk’s charges. These fees are collectively referred to as closing costs.
Average Closing Costs by County
|County||Avg. Closing Costs||Median Home Value||Closing Costs as % of Home Value|
Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources: US Census Bureau 2015 5-Year American Community Survey, Bankrate and government websites.
North Carolina closing costs are roughly 2% to just above 3% of the home price, which is on the low end of the scale compared to other states. Some of the costs are for your mortgage lender. Fees include charges for underwriting, processing, broker services, document preparation, origination points and commitment. Each lender has its own fee schedule, so costs vary between different lenders.
You’ll also need to pay for a credit report, appraisal (an optional add-on, generally), attorney, flood insurance and survey. Some of these services are required for certain loans, and some are dependent on if your preference, such as having an attorney present at closing.
Unlike some of the other states on the top 10 population list, North Carolina doesn’t charge a mortgage tax, which is beneficial to buyers. Homebuyers will have to consider title insurance, however, which is an additional fee. Most lenders require a policy in conjunction with issuing the loan, which will protect the lender’s interests in the case of a title dispute. However, buyers have the option to purchase an owner's policy to protect themselves from future disputes. The North Carolina Department of Insurance has further information on the topic for those interested in learning more.
One last fee that’s usually paid for by the seller is North Carolina state excise tax for property conveyance. The tax is $1 per $500 of value. If the property is located in Camden, Chowan, Currituck, Dare, Pasquotank, Perquimans or Washington Counties, there’s an additional land transfer tax of 1%. While these fees are written in North Carolina statutes as responsibility of the seller, you’ll want to ensure that it’s detailed in the contract so you don’t have a costly surprise during closing.
Details of North Carolina Housing Market
North Carolina, home to coastline, mountains, farms and cities, is the ninth-largest state by population with an estimated 10.1 million residents. The largest cities are mostly located toward the central area of the state and include Charlotte, Raleigh, Greensboro, Durham and Winston-Salem.
The Tar Heel State real estate market falls near the middle of the nation, coming in 27th overall in SmartAsset’s Healthiest Housing Market study. We looked at stability, affordability, fluidity and risk of loss for the study. Some of the best places to be a homeowner in North Carolina, as ranked by the study include Matthews, Lewisville, Car and Clemmons. Home values have increased 6.8% from 2016 to 2017, and the median home value in the state is $163,600, according to Zillow data (as of August 2017). Additionally, the state average for days on market is about 95 days.
The most affordable places to live in North Carolina are Stokesdale, Cherryville, Lewisville, Half Moon and Indian Trail, as determined by our Most Affordable Places in America study. We considered closing costs, real estate taxes, homeowners insurance and mortgage rates to determine the rankings.
Looking to live in one of the bigger urban areas? The median home value in Charlotte is $188,900, but the median list price as of August 2017 is $269,995. Raleigh, home to North Carolina State University, has a median home value of $223,200, with a median list price in August 2017 of $309,450. And if you heard good things about the outdoors mecca of Asheville, you’ll have to shell out even more with a median home value of $257,100 and a median list price of $369,900 (August 2017 data).
Local Economic Factors in North Carolina
Although North Carolina was once known for agriculture and manufacturing, according to the U.S. Bureau of Economic Development, the state’s largest industries are finance, insurance, real estate, rental and leasing. However, North Carolina still has a large presence in manufacturing. In fact, the largest textile mill industry in the U.S. is in North Carolina. The state is also the 10th-largest employer in the automotive sector, thanks to companies such as Daimler Trucks and Caterpillar. And it’d be remiss to leave out the famed Research Triangle Park, which encompasses Duke University, North Carolina State University and the University of North Carolina at Chapel Hill.
The Tar Heel State had the 10th-largest economy in 2016 with $517.9 billion GDP. The state’s GDP also grew at a higher rate than the national average at 1.6% from 2015 to 2016, compared to 1.5%. North Carolina is host to headquarters for 12 Fortune 500 companies, including Bank of America, Lowe’s and Duke Energy. Companies are ranked by total revenue and needed at least $5.1 billion in annual revenue for the 2017.
The per capita personal income in 2016 was about $42,000 in North Carolina, compared to the national average of $49,600. As of June 2017, North Carolina’s unemployment rate was 4.2% compared to the national rate of 4.4%.
If you’re planning on working and living in North Carolina, you might be pleasantly surprised by taxes. While there is a state income tax, it’s a flat rate of 5.75%, which was introduced in 2013 as a change to progressive income tax. This change to a flat rate meant an overall reduction in taxes for most taxpayers.
Sales tax in North Carolina is set at a base rate of 4.75%. Each county in North Carolina collects additional sales tax which ranges from 2% to 2.25%. There also isn’t estate tax, which means inherited property isn’t taxed by the state.
Ready to seriously consider a move to this Southern state? While there are many things to consider, one of the first should be if you can afford living in North Carolina. An easy way to estimate your costs is to compare the cost of living in your current location to your projected one.
For example, if a single individual making $70,000 who lives in Cleveland, OH can expect to pay 2% more in Asheville, NC on average. The slight difference is due to a 1% increase in food cost and a 2% increase in taxes. If that same individual moves to Raleigh, NC, the increase is 5% on average. However, if a person making the same amount were to move from Virginia Beach, VA to Charlotte, NC, the difference is 8% lower in the Tar Heel State on average. While there are certainly more costs to take into account as well as quality of life, you can get a baseline idea of expense by comparing location costs.
Mortgage Legal Issues in North Carolina
Homebuyers enjoy certain protections under the North Carolina’s Residential Property Disclosure Act law, such as required seller disclosures. The four-page document detailing the home and any issues won’t cover every single property concern (that’s where inspections and surveys come in handy), but will help add an element of transparency. If the seller doesn’t provide a disclosure within a set amount of time, the buyer can rescind the offer under certain conditions.
North Carolina also has laws and resources to help prevent predatory home loans. The North Carolina Department of Justice outlines tips for homebuyers and provides the contact information for the Commissioner of Banks which can help you verify that the lender you’re working with is licensed and credible.
Turning to North Carolina foreclosure processes, you’ll find that it’s relatively quick in this state. This is due to a large majority of non-judicial foreclosures, which means that lenders don’t have to initiate a lawsuit for a foreclosure. North Carolina lenders generally use deeds of trust and promissory notes when issuing home loans. Most of these loans will include a “ power of sale ” clause which is a pre-authorization for a lender to sell the property (foreclose) in the event that you don’t pay your mortgage, which is known as defaulting on a loan.
Lenders have to follow a series of steps with set timelines to issue notices and advance foreclosure proceedings. The homeowner does have the option to ask for a loss mitigation plan, which is something a state housing counselor can explain and help with. If the foreclosure goes through and the property sells, the homeowner does have the right of redemption for 10 days after the sale. This means if the homeowner somehow secures the necessary money to buy back the home, he or she has to do it within the 10-day period.
North Carolina allows lenders to pursue deficiency judgements. This means if the home sells for below the remaining balance on the home loan, lenders can sue for the remaining amount. There are a number of constraints on the judgement, however. If the lender itself is the high bidder at the foreclosure sale and has a winning bid that’s below the “true value” of the property, the lender can’t pursue the full amount. An example is if a borrower has a $300,000 mortgage and the lender wins the property at auction for $150,000. The lender can’t pursue the remaining $150,000 on the note if the borrower can prove that the “true value” of the home is less. In the past few years there have been a number of court cases pertaining to deficiency judgements. In May 2017, the North Carolina Supreme Court "held that a borrower may not defeat summary judgment simply by filing a sworn statement that the property’s value is equal to the indebtedness secured by the mortgage.” This means that borrowers have to secure evidence of the property’s value through appraisals or tax assessments.
North Carolina Mortgage Resources
|Resource||Problem or Issue||Who Qualifies||Website|
|North Carolina Housing Finance Agency||Down payment assistance and Mortgage Credit Certificate.||First-time homebuyers, move-up homebuyers and military veterans.||http://www.nchfa.com/home-buyers|
|USDA Rural Development - Single family loans||Offers payment assistance to increase an applicant’s repayment ability.||Applicants must be without decent, safe and sanitary housing; Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet; Agree to occupy the property as your primary residence; Have the legal capacity to incur a loan obligation; Meet citizenship or eligible noncitizen requirements; Not be suspended or debarred from participation in federal programs.||http://www.rd.usda.gov/programs-services/all-programs/single-family-housing-programs|
|Home Affordable Refinance Program||Refinancing.||Single family homes and condos that fit within lending loan limits.||http://www.harp.gov/|
Homebuyers can turn to North Carolina’s Housing Finance Agency for assistance. The agency offers financing options to help make home buying affordable. Programs include down payment assistance, mortgage credit certificates, deferred second mortgages and a variety of educational resources. If you’re already a North Carolina homeowner, you can find resources such as free foreclosure counseling, home repair programs and more.
Those at risk or undergoing foreclosure can contact North Carolina’s State Home Foreclosure Prevention Project or the NC Foreclosure Prevention Fund. These agencies will help coordinate counseling and legal assistance and additional beneficial services.
Low-to-moderate-income homebuyers may want to check the USDA eligible property map to see if they qualify for this federally backed loan option. The property must be located in an area deemed rural, but luckily in North Carolina you’ll find plenty of areas that qualify.
All set to make your way to the Tar Heel State? We have some reading material to prep you for the southern state. Check out 15 things to know before moving to North Carolina.
And if you’re ready to check mortgage rates and get prequalified, we have North Carolina’s current rates.